Wells Fargo discusses ABC's valuation as Disney is said to be in talks to sell to Nextar
Walt Disney Co. (NYSE:DIS) has engaged in initial discussions regarding the potential sale of its ABC network and TV stations to Nexstar Media Group Inc. (NASDAQ:NXST), according to Bloomberg News.
The talks are in a preliminary stage and have not yet involved specific valuation discussions. Nexstar has expressed interest but is waiting for the right price.
The report comes after Tom Carter, formerly Nexstar's president and now an adviser to its CEO and board, revealed at a conference this week that the company is interested in acquiring assets from traditional media companies like Disney.
Nexstar believes it could potentially acquire ABC outlets with minimal divestitures to comply with broadcast station ownership regulations.
However, there are complexities involved in such a sale, particularly regarding ESPN, Disney's sports network, which shares many telecasts with ABC. Carter noted that there are numerous unanswered questions about how this partnership would function in the event of an acquisition.
Carter also emphasized the need for Disney to provide clearer guidance on its intentions. He mentioned that while Nexstar is open to direction, it requires a clear path forward.
Wells Fargo analysts believe Disney is interested in the sale as its shareholders want the company to focus on its direct-to-consumer strategy. As far as the valuation is concerned, the analysts commented:
“Any buyer of ABC would require long-term programming incl. for current shows from DIS's studios + ESPN sports currently on ABC. We think this would all justify an EV/EBITDA multiple closer to 8x.”
Disney's CEO, Bob Iger, had previously stated in July that he was considering divesting traditional TV networks like ABC.
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